Loss at OREX Narrower than Expected

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Orexigen Therapeutics, Inc. (OREX) reported a net loss of 41 cents per share in the fourth quarter of 2012, much wider than the year-ago loss of 9 cents but 4 cents narrower than the Zacks Consensus Estimate of a loss of 45 cents per share. Revenues remained flat year over year at $0.9 million, in line with the Zacks Consensus Estimate.

Full-year loss came in at $1.27, narrower than the Zacks Consensus Estimate of $1.31 but wider than the year-ago loss of 58 cents. Revenues decreased 22.1% to $3.4 million, in line with the Zacks Consensus Estimate.

Operating expenses increased to $33.3 million during the final quarter of 2012 from $5.2 million in fourth quarter 2011, reflecting the increase in research and development expenses. Research and development expenses increased to $28.3 million from $1.5 million in the year-ago period.

The massive jump was primarily attributable to the costs for developing its obesity candidate. General and administrative expenses were up 39.9% to $5.1 million.

Along with the fourth quarter 2012 results Orexigen provided an update on Contrave. The company, which had received a complete response letter (CRL) from the US Food and Drug Administration (:FDA) in Jan 2011 for Contrave, is planning to resubmit the new drug application (:NDA) in 2013. Orexigen is hopeful of gaining approval in early 2014.

At the time of issuing the CRL, the FDA had expressed concerns regarding the long-term cardiovascular safety profile of Contrave and had asked Orexigen to conduct an additional study. The FDA requested a randomized, double-blind, placebo-controlled trial of sufficient size and duration which would show that the risk of major adverse cardiovascular events in overweight and obese subjects treated with Contrave does not adversely affect its benefit-risk profile.

In Jan 2013, the company said that the Division of Metabolism and Endocrinology Products (:DMEP) has proposed a resubmission procedure under which an interim analysis report submitted by the independent Data Monitoring Committee of the Light Study can be used for the resubmission of the Contrave NDA.

We note that Contrave, once launched, will be a late entrant in the obesity market. Last year, two obesity prevention drugs were approved: Arena Pharmaceuticals, Inc.’s (ARNA) Belviq and Vivus Inc.’s (VVUS) Qsymia.

Orexigen carries a Zacks Rank #2 (Buy). Currently, Cytokinetics, Incorporated (CYTK) carrying a Zacks Rank #1 (Strong Buy) looks more attractive in the pharma sector.

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